Budget Passes On-Time

Special Report - July 1, 2010
For the first time in seven years, lawmakers approved North Carolina’s budget in time for the beginning of the new fiscal year. SB 897—Appropriations Act of 2010 passed both chambers on mostly party line votes. Governor Perdue is expected to sign the $19 billion budget for 2010-2011 into law today. Overall, the budget reduced spending by three percent from the figures projected in the two-year budget passed last year.

The bill was a compromise between majority leaders of the Senate and House, and was only revealed on June 28—three days before it was signed into law. As such, initial amendments to the House version—such as those allowing charter schools to have some of the money that traditional public schools receive from the lottery and ending the policy of charging in-state tuition to out-of-state students who receive academic scholarships—were stricken from the final version of the bill that passed on Wednesday. The General Assembly was forced to make several other difficult decisions, including:

• Creating what may be a $519 million budget shortfall next year if federal stimulus funding for Medicaid is not provided. If this potential imbalance occurs, it would be partially offset by a one percent across the board spending cut and spending $139 million set aside for state employee pensions.
• Reducing the number of Medicaid patients to receive homecare from 38,000 to 20,000.
• Increasing tuition at UNC campuses as much as $750 per student to preserve teaching and faculty positions.
• Rescinding a provision that allowed out-of-state students with athletic scholarships to pay only in-state tuition.
• Allowing local school boards and university campuses to furlough employees, if needed.

In an effort to protect teachers’ jobs, the budget redirects a portion of lottery revenue funds to teacher salaries for teachers in early grades. Additionally, small businesses may be eligible for a new tax credit on some portion of their unemployment insurance taxes. The budget also allots additional funds for the governor to use as economic incentives to lure businesses to the state. Disturbingly, the budget authorizes $175 million in new debt for repair and renovations to state buildings and equipment for the UNC and Community College systems without placing a bond question before the citizens.

After two stressful budget writing years, next year is likely to be even worse, as the budget deficit is projected to be about $3 billion because of the end of temporary tax increases and federal stimulus money. State Treasurer Janet Cowell worries about the budget’s decreased funding of the state’s pension system. She said in a prepared statement that, “Legislators are setting themselves up for a $1.2 billion pension bill in 2011—a year in which the projected budget shortfall is $3 billion. It is my responsibility as Treasurer to sound the warning call that we are starting down a dangerous path.”

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